The Journal of Finance

Stock Returns, Dividend Yields, and Taxes

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00082

Andy Naranjo, M. Nimalendran, Mike Ryngaert

Using an improved measure of a common stock's annualized dividend yield, we document that risk‐adjusted NYSE stock returns increase in dividend yield during the period from 1963 to 1994. This relation between return and yield is robust to various specifications of multifactor asset pricing models that incorporate the Fama–French factors. The magnitude of the yield effect is too large to be explained by a “tax penalty” on dividend income and is not explained by previously documented anomalies. Interestingly, the effect is primarily driven by smaller market capitalization stocks and zero‐yield stocks.

Exodus from Sovereign Risk: Global Asset and Information Networks in the Pricing of Corporate Credit Risk

Published: 04/19/2016   |   DOI: 10.1111/jofi.12412

JONGSUB LEE, ANDY NARANJO, STACE SIRMANS

Using five‐year credit default swap (CDS) spreads on 2,364 companies in 54 countries from 2004 to 2011, we find that firms exposed to stronger property rights through their foreign asset positions (institutional channel) and firms cross‐listed on exchanges with stricter disclosure requirements (informational channel) reduce their CDS spreads by 40 bps for a one‐standard‐deviation increase in their exposure to the two channels. These channels capture effects beyond those associated with firm‐ and country‐level fundamentals. Overall, we find that firm‐level global asset and information connections are important mechanisms to delink firms from their sovereign and country risks.

Time Variation of Ex‐Dividend Day Stock Returns and Corporate Dividend Capture: A Reexamination

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00290

Andy Naranjo, M. Nimalendran, Mike Ryngaert

This paper documents some empirical facts about ex‐day abnormal returns to high dividend yield stocks that are potentially subject to corporate dividend capture. We find that average abnormal ex‐dividend day returns are uniformly negative in each year after the introduction of negotiated commission rates and that time variation in ex‐day returns during the negotiated commission rates era is consistent with corporate tax‐based dividend capture. Ex‐day returns are more negative when the tax advantage to corporate dividend capture is greatest and more positive when increases in transaction costs and risk reduce incentives to engage in corporate tax‐based dividend capture.